New code of conduct for Buy Now, Pay Later service providers sets out best practices to protect consumers
On 20 October 2022, the Buy Now, Pay Later (“BNPL”) Working Group, formed by the Singapore FinTech Association (“SFA”) and industry players, under the guidance of the Monetary Authority of Singapore (“MAS”), launched the Buy Now, Pay Later Code of Conduct (“BNPL Code”).
Allen & Gledhill Partner Adrian Ang is a member of the SFA Executive Committee that worked on the BNPL Code.
The BNPL Code sets out guidance for BNPL service providers in Singapore and aims to protect consumers and ensure that BNPL offerings will continue to benefit the ecosystem. As part of its aim to safeguard consumers against over-indebtedness, the BNPL Code signifies the industry’s commitment to abide by a fixed set of standards. It aims to crystallise best practices including:
- Creditworthiness safeguards: Each BNPL provider will permit customers to accumulate no more than S$2,000 in outstanding payments at any given time, unless they complete an additional credit assessment. This additional credit assessment must consider, among others, (i) customer income information, and (ii) customer credit information shared across all BNPL firms. BNPL providers will also suspend a consumer’s access and use of its BNPL services upon the customer’s failure to meet any payment obligations.
BNPL providers will monitor how a customer uses BNPL services and whether such services remain suitable for the customer. For example, a BNPL provider may decide that BNPL services may not be suitable for a customer if the customer fails to pay his/her bills on time on a repeated basis.
A customer who was onboarded prior to 1 November 2022 may continue with his/her prior BNPL limit until (i) the BNPL service provider assesses the customer’s income information, or (ii) 12 months from 1 November 2022, whichever is earlier.
- Fair, transparent fees, and clear disclosures: BNPL providers will cap all fees, including late fees and other charges. Fees and interest, if any, will not be compounded. All fees and fee-related structures will also be communicated in a manner that is clear and transparent to customers. Consumers are also entitled to make full repayment with BNPL providers at any time, without early repayment fees. BNPL providers will each ensure that consumers have access to account statements consolidating the total outstanding balance of purchases made through the respective BNPL provider.
- Ethical marketing practices: BNPL providers will ensure that advertisements of products and services comply with the Consumer Protection (Fair Trading) Act 2003 and with the industry-regulated advertising codes set out by the Advertising Standards Authority of Singapore. BNPL providers’ advertising and promotional materials will be clear and not misleading or deceptive. Their advertising will also make clear whether any fees or late charges apply.
- Accommodation for voluntary exceptions: BNPL providers will allow consumers to voluntarily exclude themselves from BNPL services and promotional materials once this has been communicated via writing. Providers will retain a list of the customers who have voluntarily excluded themselves from their services.
- Financial hardship assistance: BNPL providers will consider extending hardship assistance to consumers facing financial hardships to work out a mutually acceptable payment arrangement with them. BNPL providers will not allow any further transactions while BNPL providers consider how to help customers seeking hardship assistance. BNPL providers (i) commit not to initiate bankruptcy proceedings against their customers, and (ii) commit to the Credit Collection Association of Singapore’s Code of Conduct & Practice for any debt collection practices conducted.
To encourage the adoption of and ensure compliance with the BNPL Code, BNPL providers will be required to undergo an audit and accreditation process which will allow them to display an accredited trustmark showing customers that they are compliant with the BNPL Code.
The next phase of the rollout of standards and safeguards to protect consumers is expected to be completed in late 2023 and includes setting up the credit information sharing bureau, completing the accreditation process, and awarding the trustmark to accredited BNPL providers.
Reference materials
The following materials are available on the SFA website www.singaporefintech.org:
